1. Coffee
Value
Chain: a
blend of
upgrading

2. Outline
• Basic facts about coffee
• Coffee GVC
• Who’s capturing the gain?
• Economic, environmental, social
upgrading: what does it mean for
coffee VC and local development?
• Deliverables (presentation, word
file, working files)

3. Basic Facts About Coffee
• Until 1990, the world trade of coffee was
subject to a quota system controled by
ICO;
• After the quota system was abolished,
the prices have been going up and down
reflecting supply and demand trends;
• Being a primary commodity, coffee prices
are inherently unstable. One source of
price instability is the vulnerability of
coffee plants to unfavorable weather
conditions and climate changes;

4. Basic Facts About Coffee
(2)
• Despite falling prices in the 1990s,
the world production and exports of
coffee increased;
• Vietan emerged as a big exporter in
the 1990s, when the country
planted over a million acres
between 1990 and 2000 of coffee
and flooded the market with cheap
Robusta beans;

5. Price Trend – 1980-2009
Source: International Coffee Organization

6. Coffee World Exports
1980 1985 1990 2000 2007
Brazil 15.626.545 19.156.605 16.971.237 18.016.261 28.116.006
Costa Rica 1.182.521 2.040.422 2.265.644 1.964.980 1.363.850
Ethiopia 1.257.739 1.133.277 1.074.101 1.981.856 2.604.008
Uganda 1.823.592 2.537.582 2.352.680 2.513.272 2.693.187
Vietnam - 156.667 1.145.234 11.618.376 17.936.219
Germany 1.234.021 2.133.116 3.291.689 4.824.659,00 10.696.972
TOTAL 60.247.690 71.360.000 80.561.589 89.562.101 96.367.286
Source: International Coffee Organization

7. Coffee: the main actors
• Brazil, Vietnam, Colombia and
Germany are the main exporters;
• More than 50 developing countries
are highly dependent on coffee
exports; 25 of them are in Africa
• The two most important producers
and exporters of coffee in Africa are
Ethiopia and Uganda.

8. Two Different Export
Models
African Model Germany Model
• Production occurs in • no production:
smallholder farmers; Germany re-exports
• Involve millions of processed coffee at
cheap laborers; prices up to five times
more than what it pays
• Exports of non-
for the product;
processed coffee;
• Exports are controlled
• Exports depends on the
by domestic brands;
middle men and global
buyers; • Belgium, Italy and USA
follows the Germany
model.

9. Coffee Global Value Chain
Input – Output Stages
Growing/
Inputs Mediators Roasters Retail
Processing
Seed Harvesting Facilitate trade Roasting Supermarket
Land Processing
(i.e., wet method, Grinding Food Service
dry method)
Irrigation
Parchment Coffee Blending Mass Retail
Fertilizer (seed coat removed) Coffeeshops
Labor Brewing
Machinery

10. Coffee Global Value
Chain Actors
Drivers
Growing/
Inputs Mediators Roasters Retail
Processing
Small and Medium Producers International Branded
Trader Manufacturers
i.e., Nestle, Sara Lee
Estates/Plantations
Branded Blends
Marketing Board
(i.e., Starbucks)
Cooperatives
Independent
Roasters
Exporters

11. GVC Structure Open
Questions
• What are the differences between global
value chains and local value chains in
shaping upgrading? (social,
environmental, economic)
• Does concentration of the industry along
the International Traders and Roasters
segments make upgrading easier, harder?
• Do mediating bodies help growers? Are
there differences between large and
small?

12. Environmental upgrading:
Coffee Life Cycle
Exporting Developing
countries  countries
Importing
countries
Source:
Salomone, 2003

13. Main environmental issues
& upgrading
• Cultivation • Open questions
– Pollution and eutrophication – What pesticides and
(pesticide and fertilizer use) fertilizers are used?
• measures of water
– Water consumption and pollution/eutrophication
pollution
– Differences between big and
– Depletion of soil small farms approaches and
– Deforestation (shadow vs. impacts?
sun) – Is the shade grown coffee
– Biodiversity (shadow vs. sun) more environmentally
friendly?
• what are the differences in
• Processing (wet vs. dry) productivity?
– Water consumption and – Is it possible to reduce the
pollution quantity of water used in the
wet processing?
– Energy consumption
– Reduction of impacts
– Air pollution through corporation?
• how to promote it?
– Is water treatment in place in
the wet process?

14. Main environmental issues
& upgrading
• Consumption • Open questions
– Water use – How much water
– Waste production and energy are
(e.g. through away used?
cups) – Technologies to
– Energy reduce the use of
consumption water and energy in
the coffee machine?
– Air pollution
– How to promote the
reduction of waste?
Is it possible to combine environmental
upgrading with social and economic?

15. Social upgrading in
coffee chains
• Who are the workers and different
dynamics (Regular vs. irregular, ethnic
minorities, gender composition and child
labor, seasonal)
• Output standards on quantity
(employment creation) and quality of
labor (wages, hour, benefits, contracts)
• Enabling rights (freedom of association,
discrimination, force labor)

16. Social upgrading in
coffee chains (2)
• What’s the role of global buyers on
labor and environmental upgrading?
• Do smaller producers’ workers have
rights compared to
exporters/marketing boards?
• Do the pickers have organizing
rights?

17. Economic Upgrading:
making money out of a
commodity
• Product upgrading:
– Specialty blending
– Sustainable coffee
• Process upgrading:
– Wet vs. dry processing (?)
• Functional upgrading:
– From harvesting to branding and roasting

18. Branding and
differentiating
• New way and loci of consumption
• Local tastes and culture
• New blends
• Brands: values and sense-making
• Role of distribution
• Crisis

19. Illy: upgrading, branding
& sense making

20. Labels for a better world

21. Labels for a better world
• Sustainability and quality
• Private vs. Public, global vs. national,
coffee specific vs. general
• Costs to put in place the certification as
barrier to entry?
• Crisis?
• Collective actions?
• Who benefits?
• Real value of certifications?

22. Overall questions
• How does the structure of the chain affect the types of
upgrading?
• Driving players, mediators & upgrading strategies?
• Cooperatives? Better relations with international
traders?
• What are the conditions to (functional) upgrade?
• Is there upgrading potential more through domestic or
international market and impact on chain dynamic?
• Who’s capturing the gains?
• Can economic upgrading comes along with social and
evironmental ?
• Why are some developing countries not upgrading?
• Is there a local development driven by upgrading
strategies?

23. Methodology
• Case studies: Brazil, Costa Rica, Ethiopia
and Vietnam.
• Two main research questions:
(1) how producers in developing
countries were able or not able to
upgrade and improve labor and
environmental standards?
(2) under what circumstances producers
in developing countries succeeded in
pursuing (functional) upgrading?

24. Methodology (2)
• We will use historical narratives to
develop causal explanation and pattern
matching (comparisons between different
cases).
• The focus of the research will be to
understand the sequence of events that
leads to economic, environmental and
social upgrading;
• We will use the existing typologies of the
GVC literature to classify the case of
upgrading.

25. Strategy of the research
• Analyze many papers and data avalible from secondary
sources;
• Identify the independent and dependent variables
(upgrading) and develop typologies of upgrading based on
the GVC literature;
• Interview bussiness associations, small producers,
international traders, and government representatives in
each one of the four countries;
• Interview global buyers (branded manufactures) in some
developed coutries.
• Revise the intial hypotheses, develop conditional
generalizations and write the paper.